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Did Demand Concerns Spark The Biggest Drop In US Oil Rig Count Since 2012?

Tyler Durden's picture




 

Crude Oil and gasoline prices have been sliding notably recently, but, as Carl Larry, president of Oil Outlooks & Opinions LLC in Houston notes, "the focus is definitely on the U.S. and on concern about demand as we head into the maintenance season." While Brent remains more concerned about Russia and Ukraine, WTI is "focused on supply, demand fundamentals," which with production surging, leaves "everybody wondering if demand will stay steady. People are reducing risk exposure now." What we wonder is - does that explain why the US Oil Rig Count dropped this week by its most since 2012...?

 

 

 

As Crude heads for its longest losing streak since November,

"WTI is weakening because we are approaching refinery turnaround season,” said Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC. “Refinery runs aren’t going to go up much further.”

 

“More oil is coming to market instead of less, and combined with weaker demand that is adding pressure,” said ABN Amro’s van Cleef.

 

“Chinese data has been somewhat disappointing, the euro zone has been weak, and the U.S., while better than Europe, has been mixed.”

Chart: Bloomberg

 

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Fri, 08/22/2014 - 19:25 | 5132198 Hohum
Hohum's picture

Maybe.  EKM will chime in and disagree, but at $100/barrel marginal cost far exceeds marginal revenue in the Bakken.  Cash flow is very negative.  Down goes the price, down goes production, down goes Frazier!

Fri, 08/22/2014 - 19:36 | 5132247 BuddyEffed
BuddyEffed's picture

I'm suspecting it has something to do with dry hole dynamics.

Fri, 08/22/2014 - 19:46 | 5132280 knukles
knukles's picture

Lemme tell ya' dat happens when ya get older.

Mrs K just told me I should have an ebola cereal for dinner

Sat, 08/23/2014 - 11:04 | 5134087 TheMerryPrankster
TheMerryPrankster's picture

Hence the FEDS liquidity VASeLINe Funds pouring into the markets to keep the rust bucket inching forward for one more day.

New Fed Slogan "just one more day"

it's in needlepoint and hung on every cubicle wall. Right next to the photo of the banker in top hat and monocle butt fucking uncle sam in his full red white and blue regalia.

Sat, 08/23/2014 - 14:14 | 5134565 amusedobserver
amusedobserver's picture

More likely it has to do with Siluria Technologies.  Doesn't anyone surf the internet anymore?  There is a lot of the conventional idiocy posted in these comments further down so I'm putting this up here.

Siluria has working technology to convert natural gas to gasoline (and other fuels like diesel and jet fuel) at $1 per gallon.  They have built pilot plants and now demo plants, and plan to build scaled-up commercialization plants in 2017.  They have investment backing from Saudi Aramco investment arm and Kleiner Perkins.

If oil rig count is down maybe it is because we don't need expensive oil anymore.  Natgas is currently selling for about one-sixth the equivalent energy content of oil.  Either oil is going down, or natgas is going up.

http://www.biofuelsdigest.com/bdigest/2014/08/20/saudi-aramco-invests-in...

 

Fri, 08/22/2014 - 19:49 | 5132300 techstrategy
techstrategy's picture

EKM cannot be bothered to consider the shape of the supply curve has changed and that it storage is still small with respect to annual consumption.

Fri, 08/22/2014 - 20:00 | 5132358 ekm1
ekm1's picture

There could be 15 billion barrels stored around the world since 2010 if not more

Fri, 08/22/2014 - 21:06 | 5132655 chunga
chunga's picture

This article of Tyler's has some interesting comments.

As a layman I find something that is funny. If 15 billion barrels can lie around since 2010 in storage why does it begin to immediarely spoil as soon as I put it in *my* fuel tank for use.

If you're not careful it can also ruin certain motors so that's100 percent tard-a-mundo.

Fri, 08/22/2014 - 21:07 | 5132666 ekm1
ekm1's picture

accumulated since 2010-2011

Fri, 08/22/2014 - 21:26 | 5132755 chunga
chunga's picture

I don't doubt you bro but as soon as the muppet consumer buys it; it's just begging to go bad even with additives. We're talking weeks or months not years.

Sat, 08/23/2014 - 00:33 | 5133308 Totentänzerlied
Totentänzerlied's picture

Engineers and chemists please correct me if I'm wrong but pumped crude oil stored at or near ambient pressure and temperature in a more or less air-tight barrel will last a very, very, very long time... it's already been in the ground for tens or hundreds of millions of years. It's the distillate products that spoil quickly.

Sat, 08/23/2014 - 02:40 | 5133476 prmths2
prmths2's picture

Crude and distilled hydrocarbons are relatively stable. Once you produce motor fuel (e.g., gasoline) the additives (anti-knock compounds, detergents, etc.) generally enhance the ability of the fuel to absorb moisture that can react with the hydrocarbons and additives. Google "ethanol" and "marine engine."

Fri, 08/22/2014 - 23:16 | 5133148 Dave
Dave's picture

15 billion barrels in storage? Bullshit.

Sat, 08/23/2014 - 02:07 | 5133445 El Vaquero
El Vaquero's picture

And how many years would 15 billion barrels last the world?

 

6 months. 

 

 

Sat, 08/23/2014 - 08:05 | 5133742 ekm1
ekm1's picture

Enough time to attack Syria and iran

Fri, 08/22/2014 - 20:15 | 5132444 Escrava Isaura
Escrava Isaura's picture

Strategic Petroleum Reserve (SPR)

727 million barrels

http://en.wikipedia.org/wiki/Strategic_Petroleum_Reserve_%28United_State...

Fri, 08/22/2014 - 20:01 | 5132374 ekm1
ekm1's picture

The gov will provide rebates and voila, profitable instantly.

As long as technology exists and harm to water supplies and environment is deemed tolerable

Sat, 08/23/2014 - 02:07 | 5133447 El Vaquero
El Vaquero's picture

Please get back to me with a working definition of energy.

Sat, 08/23/2014 - 08:04 | 5133746 ekm1
ekm1's picture

What is the price of gravity?

Sat, 08/23/2014 - 08:20 | 5133768 overmedicatedun...
overmedicatedundersexed's picture

with all the fiat given out by the fed, this is the best economy it bought??

my area is in a depression, closed business space abounds, yet new is built, but not much..a few projects mostly tied to .gov via university and schools. yet the fiat/welfare does reduce the impact of no jobs, and lost manufactoring long gone overseas, thanks nafta and the idiots traitors in dc and cfr.

Sat, 08/23/2014 - 11:06 | 5134099 TheMerryPrankster
TheMerryPrankster's picture

energy = the ability to do work

5th grade science class

Fri, 08/22/2014 - 19:29 | 5132211 ekm1
ekm1's picture

That is a pile of excrement.

Rig count is down because there is so much oil in storage that it makes no more sense to expand extraction until the hyper super glut in storage is dumped into the consumption market and consumed

 

This will practically be a margin call on the financial system, hence Triple Lehman

Fri, 08/22/2014 - 19:33 | 5132234 fonzannoon
fonzannoon's picture

so there is an abundance of oil, which will be dumped on the consumer, substantially lowering prices, helping out margins of a lot of companies and giving consumers a needed break, and this will cause the banks to fail?

Fri, 08/22/2014 - 19:43 | 5132249 knukles
knukles's picture

It's down because of all the electric cars, bitchez.

I Love Governor MoonBeam

Aaaaarrraaaggghhhhhh

Fuck this shit... yesterday I washed baseboards and walls to maintain my sanity.... tonight I'm gonna go watch Teddy Atlas on Firday Night Fights... some of his disjointed ramblings are better than drugs... bam, pow, bam, bam ,and duh uppah cut and he's gone.  But I wuz talkin to Ceasar's mom duh uddah day an she wuz must worried about hiz eahs.  Nopt his brain becuz dat wuz already gone frum dah Spencer fightn and she said there'd be nuffin' wrong wid him fitin' Goglvnick because dere wuz no brainz lef ta smoosh and so when we wuz talkin' about is eahz...

Fri, 08/22/2014 - 19:42 | 5132271 ekm1
ekm1's picture

Yes. Because primary dealers, warren buffett and others have pledged oil as collateral of interest rate swaps

Fri, 08/22/2014 - 19:44 | 5132274 knukles
knukles's picture

Oh, that's kinda greasy

Fri, 08/22/2014 - 19:35 | 5132239 Hohum
Hohum's picture

Do the math at 6M per barrel:

https://www.dmr.nd.gov/oilgas/stats/historicalbakkenoilstats.pdf

Have a super weekend, ekm!

Fri, 08/22/2014 - 19:57 | 5132320 ekm1
ekm1's picture

I'm not sure what you mean, but I estimate that a minimum of 4-6 billion barrels are in storage and not included in calculations, which is about 1 year of US consumption

It could be as hight 15 billion barrels in storage around the world right now.

Fri, 08/22/2014 - 19:56 | 5132334 Escrava Isaura
Escrava Isaura's picture

ekm,

4-6 billion in storage?

 

Fri, 08/22/2014 - 19:57 | 5132343 ekm1
ekm1's picture

Yes. As high as 15 billion barrels around the world, maybe more

Fri, 08/22/2014 - 20:00 | 5132354 Escrava Isaura
Escrava Isaura's picture

What are you talking about?

 

Fri, 08/22/2014 - 20:03 | 5132377 ekm1
ekm1's picture

Derivatives and war preparations since 2010-2011

Fri, 08/22/2014 - 20:10 | 5132423 Escrava Isaura
Escrava Isaura's picture

So, you are telling us that:

a) Derivatives are leverage on 4-6 billion barrels of oil in the US?

b) There are 4-6 billion barrels right now stored somewhere in the US?

If you are telling us ‘a’ I can see that. But,

If it is ‘b’ you have a problem.

 

Ron Paterson: The decline is primarily because of the price of gas. Rigs are switching from gas to oil.

http://peakoilbarrel.com/texas-rrc-report-russia/

 

As you can see, we have a conundrum here.

Fri, 08/22/2014 - 20:16 | 5132445 ekm1
ekm1's picture

I am not trying to convice anybody

That is my opinion.

 

you ask questions, I answer

Fri, 08/22/2014 - 20:32 | 5132523 Escrava Isaura
Escrava Isaura's picture

ekm1,

Please, be more careful with your opinions

These types of 'opinions' needed to be backed up by empirical evidence and hard facts.

 

And these are very accessible. Thanks to the internet.

 

By the way, you noticed that people were reading you, didn't you? So your credibility too is at stake.

Fri, 08/22/2014 - 20:38 | 5132530 ekm1
ekm1's picture

No I don't have to be careful with opinions

 

There is no such thing as 'evidence'.

Everybody looks for evidence.

 

Why would somebody bound in an interest rate swap or preparing for war profide real data to the world?

 

 

Sat, 08/23/2014 - 02:11 | 5133452 El Vaquero
El Vaquero's picture

You're making a big deal over a mysterious 6 month global supply of a substance which your food depends on without anything to back up your claims. 

Sat, 08/23/2014 - 08:01 | 5133737 ekm1
ekm1's picture

Yes.

Tell me anything that can be backed up with any real data?

Sat, 08/23/2014 - 11:10 | 5134111 El Vaquero
El Vaquero's picture

A working definition of energy.  You can do some research, then go into a lab and test it yourself.

Fri, 08/22/2014 - 20:01 | 5132369 bid the soldier...
bid the soldiers shoot's picture

'Hyper super glut' is a fancy expression for 'the recovery is in the toilet.'

Fri, 08/22/2014 - 20:04 | 5132383 ekm1
ekm1's picture

Derivatives and war preparations since 2011.

Fri, 08/22/2014 - 20:06 | 5132392 fonzannoon
fonzannoon's picture

If gdp was really negaative 5% or whatever...and it very well may be, what does that do to oil demand?

Fri, 08/22/2014 - 20:08 | 5132410 ekm1
ekm1's picture

No, it's the opposite

Demand for oil never goes down, people consume whatever is available

 

Oil restricts economic expansion, not vice versa.

Fri, 08/22/2014 - 20:11 | 5132428 fonzannoon
fonzannoon's picture

so the demand for oil is constant, but it's the availability that is the issue, so we have a whole boatload (pun intended) offshore, which we will dump on the market, substantially lowering prices. Okay...so in terms of days/months, how much oil is presently being held off the market, and at what price was that oil purchased? Who would be happy to dump it on the market it and eat that loss?

Fri, 08/22/2014 - 20:14 | 5132439 ekm1
ekm1's picture

I think there are 4-6 billion barrels stored in USA and 15-25 billion stored worldwide

 

Margin call will force weak hands to sell, to cover margin.

 

Congress will order CFTC and enforce high initial margins of oil trading.

 

Physical threats to those who refuse to the point of assassinations if they actually do refuse.

 

Same as in 2008. Nothing different

Fri, 08/22/2014 - 20:28 | 5132497 fonzannoon
fonzannoon's picture

we have embarked on 4 trillion in QE since 2008. So we get a triple lehman and we just do another 4 trillion?

You know if it was not for you I would have to talk to my wife most nights. I really can't thank you enough.

Fri, 08/22/2014 - 20:29 | 5132509 ekm1
ekm1's picture

another 4 trillion will make the world instantly dump usd and go full barter.

World trade will collapse

Fri, 08/22/2014 - 20:36 | 5132537 fonzannoon
fonzannoon's picture

I thought you said same as 2008. That sounds a bit different

Sat, 08/23/2014 - 01:43 | 5133419 Totentänzerlied
Totentänzerlied's picture

Then you don't believe anyone is sincere in their SDR overtures (and assuming all major commodities would very quickly be repriced into SDR)?

Real barter, like gold/silver trade settlement, leaves vastly less room for the rather large class of parasite-rentier-middlemen...

Sat, 08/23/2014 - 00:48 | 5133333 ReactionToClose...
ReactionToClosedMinds's picture

"You know if it was not for you I would have to talk to my wife most nights. I really can't thank you enough."   <<< a gem

 

only someone who has been married 25+ years can laugh hilariously at your 'insightful' remark.  Find humor anywhere and anyhow .... the key to  sanity

Fri, 08/22/2014 - 21:20 | 5132722 bid the soldier...
bid the soldiers shoot's picture

The US military doesn't have to store any more oil than what it already has in the Strategic Oil reserves. The US military will get all the oil it wants the old fashioned way.

By commandeering, impounding and requisitioning it.

 

Sat, 08/23/2014 - 02:14 | 5133453 El Vaquero
El Vaquero's picture

Great.  If it comes to that, one day, we will have to choose between eating and having a military.  And the military will have to choose between eating and having other logistics.

Sat, 08/23/2014 - 14:16 | 5134570 bid the soldier...
bid the soldiers shoot's picture

"we will have to chose between eating and having a military."  

Fortunately, Big Brother will make that that decision for us.

LONG LIVE BIG BROTHER

Sat, 08/23/2014 - 12:26 | 5134287 Totentänzerlied
Totentänzerlied's picture

SImply rationing domestic retail and commercial gas consumption would have the same effect with less short-term and medium-term risk.

Also, annexing Canada!

Sat, 08/23/2014 - 14:09 | 5134550 bid the soldier...
bid the soldiers shoot's picture

Ah, but nothing else really preserves resources like a full blown depression.  There it remains nestled safely in the ground. untouched by human hands.  Briefly waiting for the dawn of the day of Brotherhood.

"Alle Menschen werden Bruder" 2:0 

Fri, 08/22/2014 - 19:42 | 5132260 PLira
PLira's picture

One must also consider the  "Hurt Putin PUT" on oil by opposing ideologies. Lower oil prices hurt Russia and its economy. I've read a couple of articles (which I can't reproduce so take my thoughts as you will, lol) that have stated there is a political edge to lowered oil prices. Any way you look at it, lower oil does hurt the Russian economy and its Oligarchs.

YMMV

Fri, 08/22/2014 - 23:11 | 5133141 Dave
Dave's picture

For a short time. They're accustomed to such things. How long will those low prices last if Russia shuts the valves for awhile?

Sat, 08/23/2014 - 02:15 | 5133455 El Vaquero
El Vaquero's picture

Yes, it does hurt Russia, but Russia's soverign debt situation is better than ours, and it hurts our position too.  Multiple states, including mine, depend on oil revenues, and a lot of oil companies were relying on debt at $100/bbl just to do business. 

Fri, 08/22/2014 - 20:00 | 5132356 fonzannoon
fonzannoon's picture

i find it so odd that crashisoptomistic is now crashisabsent since crude prices dropped

Fri, 08/22/2014 - 20:34 | 5132533 MalteseFalcon
MalteseFalcon's picture

Well then I'll channel 'Crash'.

"All the oil is gone.  There is no new Scottish oil field and Mexico allowing foreign firms into their oil fields for the first time since 1938 will not matter."

Sat, 08/23/2014 - 11:14 | 5134122 TheMerryPrankster
TheMerryPrankster's picture

change "all the oil" to "all the cheap easy to find oil in large quantities" and you're pretty close to the mark.

Why else piss around shattering rock to squeeeze out the gas and oil? Fracking is a symptom of declining resources.

Like a drunk wringing the dreggs from a bar rag.

Sat, 08/23/2014 - 19:10 | 5135389 MalteseFalcon
MalteseFalcon's picture

New technology makes 'hard' oil into 'easy' oil.  Do you still bemoan the loss of whale oil?

Sat, 08/23/2014 - 12:59 | 5134373 Totentänzerlied
Totentänzerlied's picture

Don't mistake the short-term trend for the long-term trend.

http://www.economic-undertow.com/wp-content/uploads/2013/08/Triangle-of-...

http://www.economic-undertow.com/wp-content/uploads/2013/12/Triangle-of-...

Yes, the latter chart's prediction was wrong. Sort of. Consumption has dropped.

Some might even say the Fed's zeroth and real mandate is to keep crude prices in the current goldilocks zone (roughly >$100, <$115), which is actually a 'triangle of doom'. This hypothesis can only take one so far, though... eventually rationing and the like will be politically expedient (in fact they already are, the post-2008 drop in demand is no different from price rationing).

I have been debating this point with an economist friend for a while: eventually oil companies won't be economically viable (as they become net-energy negative), they won't be able to sell high enough to cover costs let alone make a profit, and then all market pretense will be dropped, the energy sector nationalized, indeed outright militarized, and oil essentially price-rationed to infinity. Uncharacteristically for an economist he asserts that net-energy negative or not, governments will recover every last marginal hydrocarbon they can, damn the costs. Regarding government insanity, I'd say he's in principle right, but missing the point that any marginal post-net-negative energy hydrocarbons will be (indirectly) unaffordable to, in a single stroke, about 90% of the planet. And then, I hasten to add, we will see some very literal demand destruction, as consumers who cannot consume, that is, debtors who cannot pay, do not get to play.

Fri, 08/22/2014 - 20:12 | 5132394 ekm1
ekm1's picture

What is annual output, 85 million barrels per day worldwide?

About 20-30% of that has gone to storage since 2011, in my view, worldwide, for:

 

- collateral for interest rate swaps

 

- war preparations

 

That makes a quantity for 15 billion up to 25 billion barrels being stored around the world right now, hence ..............not available for consumption, hence..........negative GDP due to shortage of energy

Fri, 08/22/2014 - 20:14 | 5132437 fonzannoon
fonzannoon's picture

so wait...gdp is negative due to shortage of energy...

GDP is not negative due to Obamacare getting hours cut back and 100 million unemployed people because of all differemnt reasons we bitch about on here every day? It's all because gas has been above $3.50?

Fri, 08/22/2014 - 20:21 | 5132455 ekm1
ekm1's picture

Obamacare is redistribution of medical care.

Obamacare is forcing employees to spread the hours of work among many people.

So, the answers is, obamacare is not a major hit on negative gdp, it's more like rationing of medical care throughout more people

 

If cost of business gets cheaper, a lot of these part timers will become full timers

Fri, 08/22/2014 - 20:27 | 5132479 fonzannoon
fonzannoon's picture

My Health insurance went up 15% this year. In dollar terms it went up about $2,500. So we cancelled a trip we were supposed to take and ate more meals at home etc. No offense but I think you have no idea about the impact of health insurance costs on the individual budget over here.

It was a big impact on the fonz gdp. Has been for several years.

Fri, 08/22/2014 - 20:28 | 5132505 ekm1
ekm1's picture

You are paying for those don't work right now, those who qualify to receive it for almost nothing

Redistribution due to shortage of medical services, which are seeing their costs go higher and higher and....due to monopoly

Sat, 08/23/2014 - 10:29 | 5133995 sessinpo
sessinpo's picture

Dude,

You are giving ekm way to much time an credibility. I put him the file of unimportance.

Fri, 08/22/2014 - 20:20 | 5132464 Calling Elvis
Calling Elvis's picture

"About 20-30% of that has gone to storage since 2011, in my view, worldwide, for:"

Damn hard to validate those numbers any way you shake it; one way or the other.
Fri, 08/22/2014 - 20:25 | 5132491 ekm1
ekm1's picture

There is no data that can be validated nowadays, nothing.

Everything is conjecture based on countless hours of observations.

 

Nobody, not even the government or the Fed has any interest to supply correct data, none.

 

We live in a propaganda world.

Fri, 08/22/2014 - 20:38 | 5132544 MalteseFalcon
MalteseFalcon's picture

Now wait a minute my analysis that the oil will run out by 2019 is based on publicly available data.  If the data is bullshit then .......

Fri, 08/22/2014 - 20:41 | 5132557 ekm1
ekm1's picture

No such thing as correct data.

Nobody is out mind to provide the correct data to the world

Sat, 08/23/2014 - 02:19 | 5133462 El Vaquero
El Vaquero's picture

Yet you keep on posting the 15 billion barrels number.  Like you want people to believe it. 

Fri, 08/22/2014 - 20:43 | 5132561 Escrava Isaura
Escrava Isaura's picture

MalteseFalcon.

That was funny!

Fri, 08/22/2014 - 20:48 | 5132584 MalteseFalcon
MalteseFalcon's picture

Tell that to the creeps that have been pushing 'Peak OilTM' for the last 40 years.

Fri, 08/22/2014 - 20:55 | 5132605 ekm1
ekm1's picture

Earth has never run out of any elements or compounds and never will.

Everything is a matter of technology and side effects of extraction.

There is harm to environment and water.

Community, society will have to make a decision as life goes on

Fri, 08/22/2014 - 21:02 | 5132633 Escrava Isaura
Escrava Isaura's picture
Stephen Hawking's Warning: Abandon Earth—Or Face Extinction

http://bigthink.com/dangerous-ideas/5-stephen-hawkings-warning-abandon-e...

 

Fri, 08/22/2014 - 21:04 | 5132651 MalteseFalcon
MalteseFalcon's picture

Too late.

Fri, 08/22/2014 - 21:25 | 5132753 bid the soldier...
bid the soldiers shoot's picture

 

 

"Abandon ye Earth all ye who have timeshares there"

Sat, 08/23/2014 - 07:16 | 5133675 oudinot
oudinot's picture

"Earth has never run out of any elements or compounds and never will"

Really?

Tell where all the high anthracite-coke-is hiding in the mainland USA?

Sat, 08/23/2014 - 08:36 | 5133790 ebear
ebear's picture

"Everything is a matter of technology and side effects of extraction."

Sorry, but it reduces to a simpler formula than that, i.e. how much energy do you expend to recover one unit of same?

When that ratio hits 1:1 it won't matter how much oil remains in the ground.

As for technology, it will slow the descent of that ratio, but technology is also subject to that equation.  How much energy do you expend on developing the technology relative to how much you can extract with it.

You can argue about the numbers and the timeframe, but when you're drilling in deep water and fracking the hell out of shale, you know you're closer to the end than the beginning.

Sat, 08/23/2014 - 11:21 | 5134139 TheMerryPrankster
TheMerryPrankster's picture

Science must always work under the leash of economics. If there be but one part gold in a trillion tons of dross is it worth spending the gold in hand to get back but a thousandth of ones investment?

so it is with oil and gas, if it costs more oil to acquire the "new" oil are you losing or gaining oil?

Energy return on investment is a simple concept that says that science and technology are not limitless nor is capital.

its a finite world dude and a finite lifetime, wishing dreams will not make them real.

Sat, 08/23/2014 - 14:59 | 5134691 daveO
daveO's picture

I recently read that the EROEI on Brazilian cane ethanol is higher (8) than many shale projects. This can only mean one thing. An eventual US invasion of Brazil! Repeat after me. 'They hate us for our freedom'. 

Sat, 08/23/2014 - 14:55 | 5134672 daveO
daveO's picture

Not coincidentally, that was when oil was substituted for the 'sound money' gold backing of the Dollar. When it's all debt based, they need a constantly rising price, regardless of actual demand. This means perpetual wars in the oil fields.

Fri, 08/22/2014 - 21:03 | 5132639 bid the soldier...
bid the soldiers shoot's picture

About 20-30% of that (85 mbbd) has gone to storage since 2011, in my view, worldwide

That makes a quantity for 15 billion up to 25 billion barrels being stored around the world right now, hence ..............not available for consumption, hence......

so 15 to 25 billion barrels have been stored since 2011.  By 2018 the figure will be 30 to 50 billion barrels and by 2022 it will be 45 to 75 billion barrels of oil in storage. 

If this goes on till the end of time.

But if one of those barrels should happen to fall, 74 billion barrels of oil on the wall?

Fri, 08/22/2014 - 21:07 | 5132659 ekm1
ekm1's picture

No. Those are for derivatives and war preparations.

Syria and Iran will be attacked soon. Storage needed.

 

That hyper surplus will be dumped otherwise suppliers will simply shut down and not produce more

Sat, 08/23/2014 - 13:09 | 5134406 Totentänzerlied
Totentänzerlied's picture

Okay, let's assume there is marginal demand that can meet the market clearing price. Woohoo! The economy is back, baby! And then in a matter of (less than 10) years ... we are right back where we are today, except with even lower EROEI and even closer to negative net-energy ( and with a few hundred million more people [read: debtors] keeping the Ponzi g[r]o[w]ing but also ensuring that there is less energy and less growth per capita... meaning consumption will have risen on in absolute terms, even if it has fallen per capita, and will hence be even higher than before this "super-glut", hastening the day of negative net-energy just that much more).

Fri, 08/22/2014 - 20:17 | 5132451 Calling Elvis
Calling Elvis's picture

I understood early on Peak Oil wasn't about running out of oil but running out of cheap oil.  Guess we can all agree we haven't seen a lot of cheap oil (petro products mainly gas, diesel and nat gas) lately.  

So regardless of why things are happening it looks to me the fundamentals say cheap oil is a problem.  Oil down good for economy; Oil down bad for oil production.  Oil up bad for the economy; Oil up good for oil production. Get the idea?

Fri, 08/22/2014 - 20:45 | 5132566 ekm1
ekm1's picture

The government will subsidise oil extraction

Sat, 08/23/2014 - 07:19 | 5133679 oudinot
oudinot's picture

The government alreay is susidsing oil extraction wuith ZIRP.

Without ZIRP 90% of all shale plays would be abondoned.

Sat, 08/23/2014 - 07:47 | 5133718 MalteseFalcon
MalteseFalcon's picture

ZIRP isn't going anywhere and direct subsidies are possible.  We're in a war now.  Winning in the short term means winning, period.

Sat, 08/23/2014 - 11:24 | 5134150 TheMerryPrankster
TheMerryPrankster's picture

anyone notice we are always in a war?

Perpetual war = the bankers dream.

Sat, 08/23/2014 - 13:17 | 5134418 Totentänzerlied
Totentänzerlied's picture

Indeed it will, and it always has, since day one (even, or rather especially, in the early days, crude oil was of course still expensive relative to wood, coal, and animal oil - that's why we burned through all of those first, then found ourselves compelled to substitute in crude for these previously far cheaper alternatives, thus it required all manner of subsidy to get it "off the ground", the debate is whether it will ever prove to have been able to finance itself - the amount of debt created since 1880 suggests not, to me...). But once you pass peak oil, this strategy transmutes from a startup's strategic borrowing to finance expansion into a serial debtor's frantic borrowing to stay out of debtor's prison...

Sat, 08/23/2014 - 19:46 | 5135467 Totentänzerlied
Totentänzerlied's picture

Perhaps I should've named the number one "subsidy" used to finance oil: consumer credit. The oil age was never able to finance itself - the productivity of wood/coal burning consumers/businesses would never be high enough for them to be able to afford oil-burning technology and the oil to use it without levering up... I've mentioned this before.

Fri, 08/22/2014 - 20:18 | 5132452 chunga
chunga's picture

Or...like Orlov opines?

And so here is the outline of the method for calculating the timing of collapses: 1. Find out when the collapse clock starts running by looking for a significant drop in energy consumption
http://cluborlov.blogspot.com/2014/02/how-to-time-collapses.html
Fri, 08/22/2014 - 22:01 | 5132899 punkasscrab
punkasscrab's picture

This one is easy. First you are only looking at Baker Hughes data and second it is only active rig data. download an app called Rig Data and locate the current rigs ( this means drilling in process ). See the huge cluster around Williston ND and another along the front range of CO? That big gap between the two has more oil than we can use in 100 years but has lacked the infrastructure to transport it. Pipelines and transload facilities have been built over the last two years and are coming online now. The rigs are in transit and refurb for the next oil boom near Casper / Douglas WY. There are 4500 permits approved for the Moneta Divide field alone. Every rig capable od spinning a bit soon will be.

Sat, 08/23/2014 - 06:29 | 5133636 Comte d'herblay
Comte d&#039;herblay's picture

thank U for this.

Sat, 08/23/2014 - 06:30 | 5133637 Comte d'herblay
Comte d&#039;herblay's picture

thank U for this.

Sat, 08/23/2014 - 08:06 | 5133723 MalteseFalcon
MalteseFalcon's picture

No way, man.  Hubbard said back in 1969: "No more oil in the continental US" and nothing has changed since then.  Have you seen the graph?  It's downward sloped!!

/s

Now that we are in an economic war, all the BS, such as Peak OilTM, gets stripped away.

Sat, 08/23/2014 - 09:12 | 5133853 Flakmeister
Flakmeister's picture

Yep... 

And the tooth fairey works 7 days a week...

Fri, 08/22/2014 - 22:03 | 5132910 Bunga Bunga
Bunga Bunga's picture

At WTI prices below $100 producing "cheap" shale oil is too expensive.

Sat, 08/23/2014 - 01:10 | 5133367 alexdg
alexdg's picture

i forget, does anyone even care about WTI anymore? given that major consumption worldwide is based on Brent prices or blends that are even more costly?

I thought we had given up on macro economics mumbo jumbo trying to explain the WTI / Brent arbitrage. 

Sat, 08/23/2014 - 01:55 | 5133434 CheapBastard
CheapBastard's picture

"Oil is the lifeblood of the military," Rumsfeidl said. I doubt it willdrop for very long. Economies may be in recession, but wars never cease. As China faces off with Japan, etc, oil will see another hayday of $150 or more per barrel.

Sat, 08/23/2014 - 06:46 | 5133655 Last of the Mid...
Last of the Middle Class's picture

It's a big game of hammer, paper scissors. Tapped out beats peak oil every time.

Sat, 08/23/2014 - 07:12 | 5133669 oudinot
oudinot's picture

Reduced rig count has alot to do with the poor economic values that comes with oil fracking.

The depletion curve on fracked wells (which are so much more expensive to drill and complete than conventional wells)is so steep that even at $105/bbl most oil fracking companies cannot make money.

 

Sat, 08/23/2014 - 07:51 | 5133722 Wahooo
Wahooo's picture

Rig count data is about as useful as the Baltic Dry Index.

Sat, 08/23/2014 - 08:20 | 5133770 chistletoe
chistletoe's picture

so I drove through the City of Frederick the other day ....

and could not fail to observe that two long-standing storefront businesses had packed up and gone ...

 

one of those was "Manpower", the day labor supplier ....

 

the other was a place called "Fight Club" .....

Sat, 08/23/2014 - 13:31 | 5134456 TheMerryPrankster
TheMerryPrankster's picture

I checked with Google Earth, and it was actually called "Nite Club", not Fight Club.

Sat, 08/23/2014 - 09:33 | 5133892 esum
esum's picture

the world is AWASH in OIL.... it amazes me how they keep the price at the levels they do...... inflation (dollar devaluation) i guess 

Sat, 08/23/2014 - 09:34 | 5133893 withglee
withglee's picture

This "so called" drop is well within the "noise" of the plot. Look at it. In the four weeks previous, rig count was up all four. Look at the plot. This size drop and climb is common throughout. At a week boundary, if you move changes earlier or later you see there is no reason for concern at all. Look at the trends.

Up from Jan 12 through middle May 12; down lightly through Oct 13; up at same rate through Feb 14; up at faster rate through Apr 14; return to normal up rate through Aug 14. And then the "biggest dip since Dec 12."

Well, move 15 rigs pulled (less than 1%) to the previous week and this horrible pull-back goes away ... and someone trying to bring on some kind of alarm needs to be writing about something else.

Amazing!!!

 

Sat, 08/23/2014 - 10:57 | 5134077 disabledvet
disabledvet's picture

Hmmmmm. Prices for energy collapse and people want less of it?  Bwhahahahaha.

Sat, 08/23/2014 - 15:30 | 5134799 Bumbu Sauce
Bumbu Sauce's picture

So the number of US rigs is cratering.  How is the number of Cuban, Chinese, Mexican, Russian, Brazilian, et cetera doing?

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